Retiring Right: Taking Out an HECM Loan

by | Jun 8, 2016 | Financial Services

You might start off your retirement with a good amount of savings accrued. But savings dwindle over time, and you might find yourself with little to no financial security to ward off an emergency. Good thing there are plenty of options you could consider, including a Home Equity Conversion Mortgage (HECM). Investopedia defines this as a type of reverse loan. Used right, it could be ideal for bailing you out of your money problems when you hit your golden years.

How it Works

HECM reverse mortgages basically work by having the lender send payments to you, instead of the other way around. That’s where the term ‘reverse’ springs from. These loans allow you to get an advance on the equity of your property. So if you have a financial emergency on your hands—you need to have your home repaired, want a way to finance your medical bills or have to pay off the rest of the mortgage on the home—then this is a good option to consider.


You’ll have to be 62 years of age or older before you can qualify for this loan. If you aren’t in that age range yet, you may have your spouse apply for it, if yours is about the right age. You also need to own the home you’ll be taking out a mortgage on. It has to be your primary residence. If you move out, you might end up repaying the debt much too soon.


FHA limitations might apply to a home, which can keep the appraisal value of your home low. Also, your age affects the amount you can loan. The older you are, the larger the loan amount you can get. That also works if your home is expensive. Current interest rates are also factored in.

So figure out if this tool works for you. With the right financial product, you can live out your retirement in financial security and peace.

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